Red Bank challenges medical center’s tax-exempt status

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By STEVEN VIERA
Staff Writer

RED BANK — When it comes to exemption from property taxes, the borough is seeking a second opinion on whether or not Riverview Medical Center in Red Bank merits a clean bill of health.

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In the wake of a court decision last year that saw a hospital lose its tax-exempt status, Red Bank has begun proceedings to revoke Riverview Medical Center’s property tax exemptions and filed a case in Trenton with the Tax Court of New Jersey.

“There was a decision that was rendered by the Tax Court of New Jersey last year, which indicated that not all parts of a medical center or a hospital are exempt from taxation since parts of a hospital compound are, in fact, businesses that are operated for profit,” Mayor Pasquale Menna said.

Menna elaborated, pointing out that hospitals may include facilities — gift shops, flower shops and even Dunkin’ Donuts or other restaurant facilities — that are not necessary to provide patients with medical care and fulfill a for-profit function.

In 2015, after Morristown Medical Center initiated a lawsuit against its host municipality over the revocation of its tax-exempt status, Judge Vito Bianco of the Tax Court of New Jersey ruled in favor of the town and concluded the hospital did not meet the requirements for tax exemption.

The Morristown case has opened the floodgates for dozens of municipalities throughout the state, including Freehold, Long Branch and Holmdel, to begin imposing similar challenges on the tax-exempt status of hospitals within their jurisdictions. More than 30 towns already have cases on the docket with the state’s tax court relating to hospitals.

“The traditional concept that a hospital should be tax exempt has been pierced by the courts,” Menna said.

He acknowledged that while the court “recognized that the essential services of a hospital should be tax exempt,” the ruling does indicate that hospitals must demonstrate the need for tax exemptions, especially given the presence of nonessential, for-profit practices and facilities.

“It’s not that we’re challenging the entire hospital as tax exempt, but the decision has enabled us to go to the hospital and say to them, ‘Show us why you should be completely exempt,’” Menna said. “So it shifts the burden.”

While there have been discussions between the borough and the hospital, Menna declined to comment on them.

“Hackensack Meridian Health values the relationships we have with the towns where our hospitals are located, and we expect to maintain those relationships for years to come,” hospital officials said in a statement. “We remain in discussions with Red Bank and Holmdel concerning their property tax assessments. In addition, we continue to work with the New Jersey Hospital Association concerning a legislative solution for not-for-profit hospitals and host municipalities.”

Riverview Medical Center is a nearly 500-bed hospital that is part of the newly established Hackensack Meridian Health network, which formed in June after the merger of Hackensack University Health Network and Meridian Health.

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